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Social Media Marketing: Understanding the Online Lead Generation Market

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By Barry Hurd – RISMEDIA, Sept. 17, 2007-There are several threads in the RISMedia forums about lead generation and purchasing leads. What 99% of the real estate industry really wants are leads. Good, interested, and qualified leads that can be nurtured through the transaction and converted into a paying client.

Yet when it comes to the online marketplace-there has been an industry trend where may successful agents and brokers look at the latest online technology and say:

“That stuff doesn’t work.”

The real statement however, is “It doesn’t work for them.”

When looking at technology solutions like search engines, mobile applications, blogging, podcasting, and online communities; the historical “top agents” typically have a more difficult time adopting the radical shift in the relationship and sales approach. Before all of this technology existed, top agents who proudly sat in the 10% of the highest earning professionals often didn’t use any of these tools. They had instead worked the way up to the top by traditional approaches: personal and professional networking groups, physical mailings to a farming area, professional branding, and occasionally relying on other companies for lead generation.

Over the past few years, the shift in online behavior gave more and more leverage to the lead generation style of business. Information became a dominating factor in capturing leads, and many of the top lead generator companies discovered that it was easy to establish alliances using economy of scale with smaller online portals. They also realized that they could dominate less coordinated methods of lead generation using methods such as conquesting or by leveraging a large budget to buy out available leads in the market.

This eventually led us to a significant problem where we are today. Lead generator companies that are looking for leads to resell back into the industry have screwed up the marketplace.

Here is one example: Take a look at one of the highest lead generation sources available today: Google. Type in “real estate” or your local area such as “Seattle Real Estate”

As of the moment I write this (Wednesday, Sept 12, 2007), roughly 70% of the pay-per-click advertisements for “Seattle Real Estate” are going to lead generation companies.

What does this mean?

According to Google the average cost of having an ad under “Seattle Real Estate” is $3.74 to $4.95 per interested lead. There are 107 to 134 users per day clicking on that ad, which therefore has a daily cost of $410 to $670 to capture every person looking for “local real estate” in a decently sized metropolitan area.

Now we use basic business math to come to the conclusion of how the market becomes “destabilized” in this scenario.

With 70% of the leads potential of Google’s pay-per-click system going to lead generation companies, realize they have to sell the $410 to $670 of daily leads back to the real estate professional at a higher rate.

Depending on the lead generation company- the rate may be anywhere from 2% to as high as 200% over the cost they paid for a lead. For a real world example, this is just like the ticket scalper who stands in front of a stadium and buys the hottest seats and resells them on the street for twice what they paid.

Using the Seattle example: realize the monthly ad potential of Google alone for the term “Seattle Real Estate” is $76,930 to $129,830. Unlike a street scalper selling tickets however, the online marketplace becomes even more problematic because the scalper in this case doesn’t really tell you exactly what type of lead you are buying. It could be hot… or it could be cold. It could have come from Google pay-per-click, a professional partner, a blind mailing list or anywhere.

So that brings us to the real question: Why isn’t every agent or broker a lead generator online?

I don’t actually know. There are tools and services that require minimal effort to become your own lead generator. This effectively cuts out the middleman who is charging you more for what you already had access to. Every time you look at a magazine, a newspaper, a website, or a search engine and see a lead generator company advertising you should be asking yourself, “Why am I not buying that ad directly from the publisher?” or “Why isn’t my information there?”

Part of the solution to this problem is examining advertising sources that are being used by lead generation companies to produce the leads they resell to you. This includes search engine campaigns, blogging, informational articles, content management systems, and strategic alliances. Keep an eye out for the next few articles regarding some of these solutions and how they interact with the lead generation portion of the real estate cycle. We will be discussing some of these items over in the RISMedia forums: take a moment to browse the forum topics regarding lead generation and join the conversation about how these systems interact with your business.

To learn more about telling leads apart, see 3net Search Engine Marketing Blog (http://socialmediasystems.com/blog).

About the author:
Barry Hurd is president of Social Media Systems, an online marketing and advertising consultant group working with search engine marketing and leveraging social media communities. He has over 15 years of entrepreneurial Internet and online marketing experience. As an author and prolific blogger, he has reached online audiences around the world. Since the mid nineties, Barry has been involved in numerous efforts to bring forth technical innovation through online business models. Past projects have included NIKE, REI, TMP Worldwide, Monster.com, Verizon Superpages, Intuit, and RISMedia.

For more information, visit www.socialmediasystems.com.

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